Planned Legislative Changes: Tightening of fixed-term employment regulations

The coalition agreement between the German parties CDU/CSU and SPD already included changes for fixed-term employment law during the legislative period. Shortly before the end of the legislative period, implementation is now underway. On April 14, 2021, the Federal Ministry of Labor and Social Affairs (German: BMAS) presented a draft bill to amend the general law on fixed-term employment contracts. The primary aim of the draft is to restrict employment relationships concluded for a fixed term without a factual reason and so-called “chain fixed-term employment contracts”. The planned tightening is intended to make the professional life of employees more predictable.

In 2019, more than 1/3 of new hires were only temporary, meaning they were employed on the basis of a fixed-term employment contract. These fixed-term agreements were primarily fixed-term agreements without a factual reason, even though those were supposed to be the exception to the German Part-time and Fixed-term Employment Act (German: Teilzeit- und Befristungsgesetz, TzBfG). The draft bill presented intends to change this situation.

The following changes are planned and are scheduled to take effect on January 1, 2022:

• Employers with more than 75 employees may extend a maximum of 2.5% of fixed term employment contracts without a factual reason. The date of the agreed commencement of work is decisive. If this quota is exceeded, an employment contract out of the range is deemed to have been concluded for an indefinite period.
• Employers with more than 75 employees must inform their employee representatives on the first calendar day of each quarter of the proportion of fixed-term employment contracts without factual reason in relation to the total number of employees.
• In the future, the fixed-term agreement must contain a reference as to whether it is a fixed-term agreement without factual reason or on which concrete objective reason the fixed-term agreement is based (so-called citation requirement).
• In the future, a fixed-term employment contract without a factual reason shall only be possible for a maximum of 18 months (instead of 2 years). During this period, only a single (instead of the previous three) extension(s) is possible.
• A fixed-term employment contract without a factual reason is to be possible again if the previous employment with the same employer dates back at least three years.
• A time limit for fixed-term employment contracts will be introduced in order to avoid so-called “chain fixed-term employment contracts”. A fixed term shall not (or no longer) be permissible if the total duration of the fixed-term employment relationships exceeds five years. When calculating the upper limit, periods during which the employee worked for the employer as a temporary employee are also to be taken into account. Fixed-term employment in connection with (successive) projects is virtually ruled out by this.
• The total period of five years shall not apply in exceptional cases of fixed-term employment contracts concluded due to the specific nature of the work (§ 14 (1) No. 4 TzBfG), fixed-term agreements in court settlements (§ 14 (1) No. 8 TzBfG) and in the case of so-called pension fixed-term employment contracts (§ 35 Sent. 2 and § 235 German Social Code VI – SGB VI).
• Deviating provisions in collective agreements shall remain possible (maximum duration of 54 months, maximum of three extensions)

Even though the law has not yet been passed, implementation during the current legislative period is more than likely. Employers might therefore already want to check, how many fixed-term employment contracts without factual reason they have concluded and, under certain circumstances, create technical infrastructure in order to be able to keep an eye on compliance with the quota. Additionally, employers may also want to adjust existing fixed-term employment contracts sooner rather than later with regard to the citation requirement.